Can You Be Your Own Financial Planner?

A great opportunity for the American public and for advisers too

Let’s be blunt, by default everyone is really their own financial planner. Regardless of the extent of help they receive from professionals, the consumer ultimately is the goal setter, and decision maker, implementing the steps necessary to accomplish goals.

The consumer has more resources to help equip them to do their own finances, then ever before. There are dozens of apps to help people do their own taxes, manage their checking account, do bill paying, budgeting, and more complex things like investing and financial planning. There’s even a plethora of insurance and legal websites too, all of the pieces people need to put their financial houses in order.

In the last several years websites have come out that help the average consumer even generate a comprehensive financial plan (like here at eFinPLAN). Tools alone are not the be all end all without education, but the consumer has unlimited educational resources through books like the For Dummies and Idiots Guides series, Dave Ramsey FPU classes and the plethora of educational websites and blogs.

The trade-off to DIY do-it-yourself personal finances is maybe lacking help from advisers and coaches, but this is changing too. eFinPLAN offers coaching, other sites and investment firm offer advice. Some people tell us they can’t afford advisers, had a bad experience with them, and feel intimidated by them, are a few of the reasons only 52% of pre-retirees have advisers. Women find it particularly hard to find the right adviser, according to Financial Adviser. Some people just want to be more engaged, and use advisers ‘as-needed.’

Some professional advisers feel threatened by this, but instead they should like the fact that more people are taking an active role in their financial affairs. For so long people have not been engaged in their own finances, and were not always in great financial shape, as evidenced by low savings rates and high debt. More informed consumers taking greater personal responsibility make better potential clients. They build more wealth, and many will eventually reach the point when they feel over their head and want help from professionals. As people build more wealth, they have a greater need for wealth advisors, attorneys, and accountants.

Better informed clients are more engaging for professionals to work with, since they can interact on a higher level, instead of having to spend a lot of time educating them about the basics. More informed clients; challenge the better advisers, bring new ideas to the conversation and are better able to spot the Bernie Madhoffs out there.

People doing some of their own planning are more engaged in their personal finances and taking greater responsibility. This is good for them personally, good for the economy as personal debt decreases and savings and investments increase, and good for advisers who they will ultimately call for help.

What are the steps to begin the do-it-yourself financial planning process?

Step 1: Commit: The first step to financial planning always begins with commitment. Whether you’re having financial difficulty or just avoid setting goals and mapping out a plan, commitment is the first step. Commitment provides the discipline and focus needed to help sustain you on the path toward your goals.

Step 2: Set Goals: Without specific goals and a plan to achieve them, financial success stays a foggy dream. Therefore the second step is to list the dreams that will motivate you. Write down all of the goals you want to achieve in the short and long-term. This will serve as the driver, or the fire in the engine giving you the motivation to move forward. Everyone has dreams, but without constant watering and attention, dreams will go dormant. Leave your past mistakes and inaction behind you, light a new fire and chart a course forward. You have an enormous amount of potential and talent, and if you have made mistakes you now have more experience and wisdom. Dare to imagine what you could achieve, because your best years are ahead of you.

Step 3: Assemble and organize information: Get your stuff together. Planning is easier if you assemble everything in one central location. Make an organized filing system either in a cabinet, an accordion file, a box, or any other way that works for you. Now locate and file all of your tax returns, receipts, insurance policies, contracts, wills, mortgages, deeds, titles, pay stubs, employee benefit statements, banking (loan, savings and checking), bills, investment and retirement plan statements and any other important papers.

Step 4: Manage Cash Flow: Your household is a business. You need to know how much you are earning and spending each month. Balance your checkbook and establish a budget. There are dozens of books and software to help with this, and your bank’s website may provide this as well. This will help you know when and where you are overspending. Budgeting software that I particularly like is You Need a Budget or YNAB.

Step 5: Self Educate: Establish a sound foundational knowledge base about financial matters. Start with books about budgeting and money-saving tips, debt, basic insurance and investing. Be sure to include reading about mutual funds and financial planning. Avoid get-rich-quick, real estate, gold or innovative ’secrets’ books. Stick to the fundamentals. I find the “For Dummies, ‘For Idiots’ and ‘D-Mystified’ book series to be very helpful for many people. Lastly, stay informed about current financial topics by reading financial magazines, newspapers, the business section of papers, and blogs.

Step 6:Get a financial plan. A plan is a written plan serves as a road map toward your financial destination. It helps you understand where you are presently and the steps that you need to take to move forward. A financial plan is a process. As your life changes with income changes or the birth of a child, your plan should be updated to reflect your new circumstances.

Step 7: Engage Professionals: Most people can’t entirely do all of their financial planning by themselves. Estate planning attorney, tax planner, insurance and investment professional can be quite helpful. Before committing to anyone, get referrals for trusted professionals from people whose opinion you respect and don’t be afraid to ask challenging questions.

This may seem like a lot of work, but it shouldn’t keep you from staying in charge of your financials. Need some help? eFinPlan is a low-cost solution to provide you with an unbiased financial plan.